For people who desire a dream car-or two or three-there are a number of ways to attain that goal simply and easily.
The
obvious option is to buy the car, which is what many wealthy people do
and what many advisors would recommend. But for those who may want to
change cars often, and not have to deal with ownership responsibilities
and a depreciating asset, there are alternatives.
A relatively new solution is to join a fractional automobile club that, like a vacation home time-share, gives members rights to a number of cars on a part-time basis. A variety of leasing options can also make driving in style easier and free of worry, according to dealers.
For those on the East Coast-from Boston to Washington, D.C., and from Orlando, Fla., to the Keys-Gotham Dream Cars of New York and South Florida offers rental and time-share plans on a fleet of sports and luxury cars. Noah Lehmann-Haupt, a 30-year-old entrepreneur who has a background in technology and finance and a love of fine automobiles, founded the company in 2004.
"We looked for a trustworthy place to rent a super car in the northeast-a real super car-and found none worth a phone call," Lehmann-Haupt says. He opened Gotham Dream Cars in New York City, expanded to Florida in 2006 and recently started a time-share/fractional program called the DreamShare Membership Club.
"Why buy a $2 million car collection when you cwan access ours for a fraction of the cost?" he asks.
DreamShare has a $3.5 million collection of more than 20 vehicles and Lehmann-Haupt has plans to add more, including a Rolls-Royce Phantom, a Mercedes-Benz SLR McLaren and a Ferrari 599 GTB Fiorano. The firm buys and services the cars and does not act as a middleman for car dealers.
Time-share/fractional car ownership plans typically charge an annual fee for a block of points that can be redeemed for a certain number of driving days. The few companies that offer them usually offer various levels of membership. At Gotham, for example, a Diamond membership costs $49,000 a year for about 80 driving days, Elite membership costs $28,000 annually for about 40 days of driving and Titanium costs $18,000 for about 24 driving days.
The ultra-wealthy need to think carefully about the high-end car market, whether it be a purchase or lease, experts say.
"This is definitely a luxury, even for the very wealthy," says Ken Eaton, a principal at Stepp and Rothwell Inc., a financial planning and investment management firm in Overland Park, Kan. The firm caters to high-net-worth individuals in the Kansas City area and provides concierge services that can include buying a car or negotiating a mortgage on behalf of a client.
"I would tell a client not to make an impulse buy," Eaton says. "If you are going to buy, you have to consider maintenance, storage and other issues. These kinds of cars are highly tuned and most are not meant to be driven on a daily basis. The number of times you could use it might well be limited."
That's one of the reasons Lehmann-Haupt feels his company holds an advantage in the affluent market. "Some people do not want to deal with the hassle of owning one of these cars," he says. "They take a lot of tender loving care and even a very wealthy person is not going to buy one of each. We give them all the benefits of ownership with no downside."
A graduate of the Massachusetts Institute of Technology, Lehmann-Haupt worked at Montgomery Securities, Lazard Asset Management and JPMorgan before co-founding a financial software company, TruExchange. After selling that firm for a profit, he turned his love affair with luxury cars into his rental enterprise, starting with the purchase of a Ferrari 360 Modena.
Gotham started with rental rates ranging from $695 to $2,250 a day and door-to-door delivery service. The company also threw in personalized CD collections.
Then he added the Dream Car Tour service, which gives car lovers a chance to drive a half dozen exotic cars with four hours of professional instructions for a total of $895. Then came the DreamShare program.
George Johnson, a construction contractor from South Plainfield, N.J., found Gotham a year ago when he was shopping online for a Ferrari. He finally decided to use the time-share plan, for a variety of reasons.
"I would recommend this to anyone who does not have the time to tend to a car like this. I pick up whatever I want in perfect condition. I bring it back dirty. It's true I never get to own it, but I also have no obligation," he says. "I don't have to fix it, insure it, find a secure garage to keep it in or find someone to tune it. I usually go to Gotham, but they would deliver if I wanted them to. In the end, I can just enjoy the car for the weekend and then forget about it."
Johnson rarely uses the service in the winter, although he did take out a red Lamborghini to go to a Christmas party and he has taken a Ferrari to the casinos in Atlantic City, N.J.
"A day in a Lamborghini is about $2,000 for me," he says. "Driving it relieves stress. Someone tried to steal one once and broke a window. I just drove back to the lot and they told me to take another one."
Unlike antique and vintage cars that appreciate in value if well cared for, high-end luxury and sports cars depreciate. Lehmann-Haupt says the loss in value can be considerable.
"Some of these cars [drop] like a rock," he says. "A brand new Aston Martin Vanquish was $240,000 in 2003. We bought it for $140,000 in 2006; now it is worth $90,000. A Ferrari 430 Spider in six months can go from $330,000 to $240,000."
Eaton, however, warns that fractional car clubs are a relatively new phenomenon, so caution should be exercised.
"Cars owned by a car club are new only once, and the costs of membership may go up later," Eaton warns. "You are getting into something fairly new in fractional clubs, so the business may not be viable. If you want total access you won't get it with a club membership since someone else may want the make and model that you want at the same time."
On the other hand, he says, "A high-end car requires a lot of time to maintain if you own it and finding someone to maintain it here in the Midwest can be a problem."
Tax considerations also need to be taken into account when buying a high-end car. Half-million-dollar car purchases usually need financing, and all of the interest is frequently not deductible. The cost cannot be written off as a business expense unless the car is used legitimately for business purposes.
"Every state's tax regulations are different for personal and sales taxes, so we would weigh the differences for the client," Eaton advises. "But you have to consider how long you may keep the car and how much you will use it if you are considering buying. Leasing might be another option, depending on tax considerations and cost."
Mitchell Katz, president and CEO of Premier Financial Services, based in Woodbury, Conn., has made a profession of providing some of those other options. Premier, an independent finance company, offers lease-to-own and simple leases on new, vintage and exotic cars valued from $25,000 to more than $1 million.
Katz, also a car enthusiast, developed a simple lease that allows clients to either own their selected car at the end of the lease or turn it in for a different or newer model at any time without penalties or paperwork.
"Our program is tailor-made for investors or hobbyists who want to upgrade their collections periodically," Katz says. He has grown Premier Financial Services from a $7 million business less than a decade ago to a $100 million business today.
"Our simple lease gives drivers the ability to get in and out of a lease easily. It means less out of pocket money and we are probably the only company that amortizes the value of the car over the life of the lease. Taxes can vary depending on what state the car is garaged in, but there can be business write-offs if you entertain clients or use the car for advertising.
"We do 60-month lease terms but by the end of two years, more than half of our customers have paid off the lease, traded the car in or sold it because they want the newest, greatest, hottest car available," Katz explains.
Premier Financial specializes in exotic contemporary cars like the Ferrari, Lamborghini, Aston Martin, Bentley, Rolls Royce or Porsche and vintage classic cars like the 1919 Pierce Arrow or the antique Rolls Royces the firm owns. The company sponsors vintage car rallies, usually for charity events.
Premier has representatives across the United States and has a business alliance with Aston Martin.
David Tunkl, a fine art dealer in Los Angeles, has worked with Premier for several years and now has four exotic cars, including an Aston Martin DBS and a Porsche Carrera GT.
"This makes it easy for me to have multiple cars," the art dealer says. "Economics is part of it because I am only putting down a tenth of the value and it makes it easier to own several cars. But it is more the simplicity that makes leasing attractive. I can own one car for a little while and then easily change to the newest thing if something else strikes my fancy."